The recovery in Dutch housing and commercial real estate markets is now accelerating with falling yields approaching levels seen in other main European markets, according to new research from Syntrus Achmea Real Estate & Finance.
The recovery in Dutch housing and commercial real estate markets is now accelerating with falling yields approaching levels seen in other main European markets, according to new research from Syntrus Achmea Real Estate & Finance.
'The momentum behind the yield compression that started in the summer of 2014 has really sped up in the last few months and yields are dropping fast,' said Henk Jagersma, CEO at Syntrus Achmea Real Estate & Finance.
'Debt is back in the Dutch market as financers compete amongst themselves for business and this is adding to the pressure on yields as investment strategies further up the risk curve become attractive again.'
Syntrus Achmea concludes in its latest annual research on Dutch real estate and mortgages that the greatest decline in yields is being seen in the residential market reflecting an upswing in the economy and consumer confidence.
Residential values
As prices have soared for good quality housing in the largest cities, particularly Amsterdam, yields have contracted by anything from 75 to 100 basis points from year-ago levels. The best residential locations in the Dutch capital are now achieving yields of around 4%, compared with 5% in 2014, meaning that all the losses incurred in the years since the Global Financial Crisis of 2008 have been made up in the last 12months.
Lowering LTVs and the strong recovery of residential values have also meant a further improvement in the risk profile of residential mortgage portfolios. Valuers, however, remain cautious and valuations are lagging months behind actual transaction levels due to the speed of the market move.
From an investor perspective it is becoming increasingly difficult to source good quality rental residential stock, with municipalities preferring to sell to the more lucrative private owner-occupier market. Jagersma urged local authorities to reserve planning permission for more rental development sites to meet high demand. That demand is unlikely to abate any time soon due to strong urbanization trends towards the main cities and the high growth in single-person households.
The retail property sector, and to a lesser extent the overbuild office market, are also seeing an increase in investor interest.
Jagersma concluded: 'Real estate investors have widened their search for yield from the big cities like London, Paris, Munich and Berlin, to broader urban areas within the UK, Germany, France, Scandinavia and more recently the Netherlands. Therefore we expect yields to continue to fall across Dutch property sectors for the medium term.'